State: eminent domain not possible for NGL pipeline

FRANKFORT — The companies that propose to build an underground natural gas liquids pipeline across Kentucky do not have the power to condemn properties to gain easements, State Energy and Environment Cabinet Secretary Len Peters told a legislative committee Thursday.

Peters said he asked the cabinet's legal counsel to investigate whether the power of eminent domain — the authority to condemn private property for public use — extends to the pipeline companies.

"Based on this research relative to federal law and statutes relative to how natural gas liquids pipelines are regulated, they do not see how eminent domain can be invoked," Peters told the Interim Joint Committee on Natural Resources and Environment.

That declaration was met with applause from landowners who packed the Capitol Annex committee room with a capacity of 250 people. Forty more people were in an overflow room.

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The exact route for the pipeline has not been determined, but it would enter Kentucky in Bracken County and run to Breckinridge County, where it would connect to an existing line than runs to the Gulf Coast.

Before Peters' declaration, a lawyer for Boardwalk Pipeline Partners said minutes before that the companies do have condemnation power under the law as a "common carrier."

Sen. Whitney Westerfield, R-Hopkinsville, asked: "In the event you come across a landowner who doesn't want to part with their land even temporarily for that construction, they don't want to give you a right of way, I'm curious if you think you have or can use eminent domain authority?"

"Yes, we do have eminent domain authority under Kentucky statutes," said Mike McMahon, general counsel for Boardwalk. "We are going to be transporting oil and gas products in public service."

The public service comes in keeping natural gas prices low not only for Kentucky but for others elsewhere, McMahon said.

Typically, 98 percent of affected landowners along a particular route will accept an easement offer, he said.

"A lot of times the reason we end up going to court for eminent domain is to clear title," McMahon said. "You may have certain heirs who cannot be located and you have others who say 'Yes, we want to sell you the right of way.' But there are rare occasions, usually less than 2 percent of landowners, after we finalize the route, that we have to exercise eminent domain."

Tom FitzGerald, executive director for the Kentucky Resources Council, an environmental advocacy organization, said the issue about eminent domain needs to be clarified by the legislature either in a special session or in the 2014 regular session. Otherwise, a court will need to decide the issue.

McMahon drew groans from the crowd when he said "we haven't really started talking to landowners about purchasing" rights of way. "Please!" several people said to dispute his assertion.

Company representatives said the pipeline would bring $136 million in tax revenue to the state and $30 million to $50 million in easement payments to property owners. Construction of the pipeline would mean 1,500 jobs. That resonated with one lawmaker.

Rep. John Will Stacey, D-West Liberty, said, "No one wants a road in their back door but everybody wants jobs. ... We need the economic development opportunity that things like this offer Kentucky."

Natural gas at a well site might include other hydrocarbons such as ethane, propane, butane, isobutene and pentanes. Those hydrocarbons are called natural gas liquids, or NGLs.

Each has it own unique properties that make it suited for a specific use. Butane is used in cigarette lighters, while propane is used in backyard grills and home heating systems.

Petrochemical plants are the largest consumers of these NGLs. NGLs can be transported by pipeline under pressure in a liquid state, or by truck or by rail.

But a pipeline, said Jim Scheel, senior vice president of Williams, "is the safest and most economic way to get these products to market."

Landowners who oppose the pipeline expressed frustration after the two-hour hearing that they were not allowed to speak.

In a meeting after the hearing, Don Dampier of Scott County told fellow opponents that if he had been allowed to speak, he would have raised his concern about the pollution of groundwater in the event of a pipeline rupture.

"Kentucky's signature industries — the Thoroughbred horse industry, the bourbon whiskey industry, and our sustaining and varied agricultural industries — for all of these industries, fresh water is necessary," Dampier said.

State Sen. Jared Carpenter, R-Berea, co-chairman of the interim committee, said there will be opportunities to hear from landowners at a committee meeting later this year or during the 2014 regular legislative session.

"I had to set the agenda with the folks we had on hand to make sure we could get out of there at a reasonable time," Carpenter said. "I had people complaining that we stayed two hours. If I had let everybody that had a concern speak, we'd have been there till 10 o'clock at night. ... I would encourage them to contact the legislator that represents their area or myself to make sure we can get the information and their concerns out."

In the meantime, opponents said they will continue to organize and state their position.

"We have to keep plugging away," said Gina Scott of northern Woodford County. "The battle is not over."